Philippine manufacturers ‘squeezed’ as costs soar, demand falls

MANILA, Philippines — Philippine manufacturers are warning of a worsening double whammy from surging inflation and a renewed contraction in factory activity, both linked to the still-unresolved conflict in the Middle East.

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In a statement, the Federation of Philippine Industries (FPI) said businesses were now grappling with rising fuel, electricity, freight, and raw material costs at the same time that higher prices are weakening household purchasing power.

This came after inflation accelerated sharply to 7.2 percent in April from 4.1 percent in March, while manufacturing activity, as measured by S&P Global’s purchasing managers’ index, fell to 48.3 in April from 51.3 in March.

“Manufacturers are now navigating a difficult two-front challenge,” said Elizabeth Lee, chair of the umbrella group representing the country’s leading manufacturers and producers.

“On one side are rising costs for fuel, electricity, freight, imported inputs and raw materials. On the other is softer demand as inflation reduces household purchasing power,” Lee added. “Businesses are being squeezed from both ends.”

Shortened planning cycles

The FPI said manufacturers have begun shortening planning cycles, adopting more flexible operating strategies, and reassessing capital expenditures to cope with growing uncertainty.

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“As long as external conflicts and supply disruptions persist, the operating environment becomes more difficult for economies like ours that are largely price-takers in global markets,” Lee said. “Every prolonged shock eventually feeds into local costs, business confidence, and investment timing.”

Still, Lee said the disruptions could also push firms to improve efficiency, localize supply chains, and accelerate automation.

“The Philippines continues to benefit from a large domestic consumer market, a young workforce, ongoing infrastructure upgrades, and a manufacturing base that remains fundamentally resilient,” she said.

The FPI urged the government to accelerate reforms, including lowering logistics costs, ensuring reliable and competitively priced energy, strengthening domestic supply chains, and intensifying enforcement against smuggling and unfair trade practices.

“If these reforms are accelerated, the current challenge can also become a catalyst for a stronger, more self-reliant, and more competitive Philippine industrial sector and a more resilient economy,” Lee said. /atm